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Instead of investing in the bank, you are planning to buy and rent a machine. The high-performance machine will cost you $5000, and it depreciates
Instead of investing in the bank, you are planning to buy and rent a machine. The high-performance machine will cost you $5000, and it depreciates at the rate of $1000/year. Calculate what is the implicit rental price of the machine if the interest rate remains at 5%. Explain how this implicit rental price depends on the interest rate, depreciation, and alternative investments.
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